EDA Minutes 07-24-1990
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MINUTES
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Tuesday, July 24, 1990 - 7:00 A.M.
City Hall
MEMBERS PRESENT: Chairperson Ron Hoglund, Fran Fair, Barb
Schwientek, Warren Smith, and Bob Mosford.
MEMBERS ABSENT: Al Larson and Harvey Kendall.
STAFF: Ollie Koropchak.
1. CALL TO ORDER.
Chairperson Ron Hoglund called the EDA meeting to order
at 7:05 A.M.
2. APPROVAL OF THE APRIL 24, 1990 EDA MINUTES.
Warren Smith made a motion to approve the April 24, 1990
EDA minutes, seconded by Fran Fair, the minutes stand
approved as written.
3.
CONSIDERATION TO HEAR ADJUSTED REDUCTION OF THE GMEF
ALLOCATION FOR TAPPER'S INC.
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Koropchak informed the EDA members that the GMEF loan
for Tapper's Inc was reduced from $100,000 to $88,000.
This became necessary, as the Small Business Administration
(SBA) officers would not accept the recommendation of
Bob Heck, BDS, Inc., as given to the EDA upon the GMEF
loan approval. SBA loan requirements state that any
subordinated debt must have a maturity equal to or
greater than the 504 debenture. The subordinated
debt gap for equal maturity is $12,000. therefore, the
Tax Increment Finance (equity) was increased to rectify
the problem. This meets SBA requirements and allows
for a greater remaining balance in the city's revolving
loan fund and reduces the city's loan amount which is
a third position loan. The minimum market value placed
in the assessment agreement of the redevelopment agreement
is sufficient to cover the increased proposed budget. bond
issuance, and bond indebtedness. The developers. Wright
County State Bank, SBA, and Torn Hayes were all in
agreement with the recommended resolution.
4.
CONSIDERATION TO REVIEW PRELIMINARY GMEF LOAN APPLICATION
FOR EASTEY, INC.
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Koropchak reported that approximately one year ago, the
Eastey Company had visited with Kevin Doty. Wright County
State Bank. regarding the need for financial assistance.
Mr. Doty was unable to assist a company outside the bank's
regional area, however, he gave the Eastey Company the
name of Pat Pe1string, BDS, Inc., who has a financial
consultant agreement with the Housing and Redevelopment
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EDA Minutes 7/24/90
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4. CONTINUED.
Authority. This reference was done as the company expressed
an interest to expand in the Monticello area.
On Monday, June 25, 1990, Charlie Rogers, Pat Pelstring, and
Koropchak met to discuss the potential of a financial proposal.
The Jeff Eastey Enterprises, Inc. is a small company located
off Highway 101 in Rogers, Minnesota. They designed and
produce a shrink wrap machine which sales for $5,000-$6,000,
they do rebuilts, and would like to expand their operation
to include a basic full line production. The company
currently employs twelve and plan to employ an additional
five to seven with the proposed expansion.
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Pat Pelstring summarized the company sales at $1.5 million
and stated the company is highly leveraged. On July 10, 1990,
the same group (plus Sally Eastey) visited the M&P Transport
facility. The company is looking to lease an approximate
7,200 sq ft of which Jay Morrell's one bay fits perfectly.
An initial proposal letter was prepared by BDS, Inc. and
signed by Koropchak, stated total capital required, $450,000
(operating capital, $400,000 and equipment acquisition,
$50,000). Sources proposed were SBA Guaranteed Loan Program,
GMEF (equipment), and Central Minnesota Initiative Fund.
Again, Pat summarized the financials as good, the need to
pullout the Research and Development for greater profit-
ability. Monticello makes good sense as it is within a close
proximity of existing facility in Rogers. The company
needs to prepare the GMEF preliminary application,
draft a letter of intent, contact a lending institution.
and draft a lease agreement with Morrell.
IDC representatives Ron Hoglund. Shelley Johnson, Jeff O'Neill
and Koropchak visited the Eastey facility in Rogers on July 20th.
The group was given a demonstration of how the shrink wrap
machine and tunnel (heat process) works. The product is
quality and soundly constructed. Jeff Eastey is 80% owner
and is the company's designer and sales person. Sally
Eastey is 20% owner and finance controller. The company
states they have always liked the Monticello area, they were
more or less forced into purchasing the Rogers five acre
parcel and have concerns about entrance and exist with the
proposed four-lane Highway 101. Mostly, a Monticello site
location is favorable because of our tax structure compared to
Hennepin County.
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Koropchak compared the EDA public purpose criteria to the
company's application. First. Koropchak explained no
recommendation is given at this time as to the company's
credit worthiness because a bank nor staff has not seen
financial statements. Five of the six public DUr?OSes
are satisfied, the one not satisfied is there would be no
EDA Minutes 7/24/90
Page 3
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4. CONTINUED.
increase in the community tax base as Eastey plans to lease
initially. Other issues of concern addressed were: 1) to verify that
jobs created are new; 2) owners Jeff and Sally Eastey are
divorced; 3) a M&E loan would be to a leased property business;
4) what can be used for collateral; and 5) $450.000 is a very
healthy loan request for a company who started in 1986.
It was recommended by the EDA that the M&E loan become due
if the building is vacated or the company is no longer located
in the City of Monticello. Attorney Tom Hayes will address
this issue. advise the EDA. and draft the appropriate documents
if agreed. The EDA agreed that leasing a facility would
allow the company more time to increase profitability prior
to additional debt for land and building.
Barbara Schwientek made a motion stating the project was worth
looking at. recommended staff continue working with
Jeff Eastey Enterprises. Inc.. and to request the company
to complete the GMEF formal application. This motion is a
preliminary application acceptance. only. with final loan approval/
denial at a future date. Bob Mosford seconded the rrlGcion
and without further discussion the motion carried 5-0.
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5. OTHER BUSINESS.
The EDA briefly discussed the idea to change the EDA meeting
time from 7:00 AM to 7:00 PM as suggested by a couple of
members. In their opinion. this would allow more relaxed time
for discussion and approval consideration. It was decided
to table the issue until after Council member Fran Fair and
Warren Smith term~'expire.
Bob Mosford requested that meeting notices be mailed two
weeks prior to a meeting.
6. ADJOURNMENT.
Chairperson Ron Hoglund adjourned the EDA meeting at 7:40 AM.
~\<O\O~~
Ollie Koropchak
EDA Executive Secretary
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